Finance Chairman says Payment Audits Must Not Overburden Providers Who Play by the Rules

WASHINGTON –In a Senate Finance Committee hearing today, Chairman Max Baucus (D-Mont.) called on Congress and the administration to strengthen a key Medicare program that saves taxpayers millions of dollars each year by rooting out improper payments to health care providers. However, the Senator warned that the initiative, the Medicare Recovery Audit Contractor (RAC) program, must fulfill its important mission without overburdening health care providers with red tape. He said the overall goal should be to reduce the amount lost to overpayments – which totaled an estimated $29 billion in 2011 – to zero.

“Making sure the government spends Medicare dollars wisely is one of our chief responsibilities – one I take seriously,” Senator Baucus said. “Ensuring Medicare pays accurately is a difficult and complex job, but different audit contractors have been layered over one another throughout the years. While some overlap may be necessary, Congress and Medicare should work to simplify the way audit contractors interact with providers. These audits can’t overburden legitimate providers who play by the rules. We need balance.”

The 2003 Medicare prescription drug law created the Recovery Audit Contractor program as a six-state demonstration project. Over a three-year test period, it returned $900 million to Medicare. Following that early success, Congress expanded the program to cover all fifty states, as well as Medicare and Medicaid managed care plans. In 2011 alone, the program’s private audits returned nearly $500 million in overpayments to the Medicare Trust Fund.

However, many health care providers have said the audits are overly burdensome and force them to use up limited resources. Senator Baucus cited an example of one hospital in Kalispell, Montana, which has had to dedicate eight employees to appeal and respond to the audits. Since it began undergoing audits, Kalispell Regional has been successful in 53 percent of its appeals.

Senator Baucus said Congress and the administration should build on the RAC program’s success, but avoid hurting health care providers who play by the rules. He offered three steps for Medicare to take:

Incentivize private contractors to focus on the most at-risk services and providers so that providers with a long track record of following the rules are rewarded.

Bolster provider education efforts by Medicare and its contractors so that providers do not unknowingly violate rules.

Make the appeals process more efficient to lighten the burden on providers.